Applications Battlefield Mid-Year Scoreboard
- August 29, 2002
Part 4: Other Vendors, CRM, SCP & User Recommendations
market has recently witnessed a number of high-profile announcements of
stalwart vendors in the enterprise applications space. Given the contrasting
nature of these announcements, from impressive to disappointing financial
performances on one hand, and from new acquisitions and/or job openings
to massive layoffs on the other hand, it becomes painfully obvious that
the overall picture largely consists of many shades of grey.
is a four-part note covering large and small ERP vendors, scoring their
progress during these unsettled times.
One discussed recent financial results of:
Two discussed the impact on Microsoft. Part
Three discussed the Market Impact on IBM. This part covers the other
ERP vendors, CRM, SCP, and makes User Recommendations.
"bigger is better" largely applies in the case of pure enterprise application
providers as well, since vendors like SAP, Oracle, PeopleSoft
and Siebel, with a sufficient number of clients are in the best
position to ride out the storm. They can go back to their client base
to up-/cross-sell new products, and that is typically a lot easier to
do with software than trying to open the door for the first time. With
few honorable exceptions, enterprise application vendors are experiencing
dwindling revenues across the range.
any economic recovery sightings now expected only sometime in 2003, application
vendors find themselves in a precarious situation where, concurrently
with dismal revenue inflow, there is a need for bigger investment in the
development of their products. This is especially true for those vendors
that are in the process of catching up with a missing functionality and,
more important, updating the product technology foundations to be able
to communicate in a new Web Services-oriented world. Vendors unable to
keep abreast of technology demands of a vertically focused solution that
provides tangible returns in ever-smaller project chunks are in a danger
of becoming has-beens.
the best software bets are the clear leaders in their fields SAP in
the ERP and as of late in the SCM market, Oracle in the database market,
PeopleSoft in the HR market, and Siebel in the CRM market. SAP, although
experiencing lower revenues and the challenges of executing better in
North America and in the lower-end of the market, with more than 18,000
customers and 36% market share for back-office remain poised well to spar
with many difficulties the future may bring (see SAP
Keeps Traction On Some Tires Of Its Omni-Wheel-Drive). The similar
holds for Oracle, despite the ongoing product quality issues and relentless
competition from IBM and Microsoft in the database and application server
markets (see Stalled
Oracle Fumbling For A Jump-Start Kit).
encouraging might be the fact that despite the tough market conditions,
PeopleSoft is finding success beyond its proverbial strength in financials
and Human Resources (HR) by acquiring more than 110 SCM and over 80 CRM
customers lately in an extremely competitive environment. PeopleSoft is
also cultivating well its installed base - with 800 customers live on
version 8 and approximately 1000 upgrades in progress, PeopleSoft continues
to have a good opportunity to sell additional modules when the rest of
its base decide to upgrade. With SCM, CRM, and enterprise portals providing
a growing percentage of PeopleSoft's revenues, it is commendable that
at a time when many software vendors are slashing R&D costs, PeopleSoft
seems to be continuing to invest in the future (see PeopleSoft
Building Muscles To Overcome The Rough Patch).
SCM and CRM Providers
pure-play SCM and CRM vendors (e.g., i2, Manugistcs, Logility,
Siebel, Pivotal, Onyx, etc.) may become marginalized
by increasingly strong SCM and CRM capabilities of ERP vendors.
i2's ongoing languishing phase underscores just how difficult it is for
best-of-breed vendors to survive without either a large roster of reference
customers to rely on or a broader functional support for the follow up
sales process. In the i2's case, the predicament has even been aggravated
by rampant imprudent acquisitions during its better days resulting in
disparate data models and systems, and a lack of product scalability and
depth. As a result i2 now has to achieve three critical goals -- a return
to profitability, rounding out an integrated product stack, and an intense
focus on customers that was largely neglected in the past (see Nike
Blames i2 For Finish In Losers Bracket) all in the time of lost
momentum and negative publicity. Identified and set out a few months ago
by the management, the goals might be too much too late, as they will
certainly take a long time to achieve and will be painstakingly reflected
in the company's financial performance, with current hefty cash being
possibly insufficient in the long run.
complexities need to be managed in the overall customer strategy, such
as migration to more standard supportable modules, which would allow i2
to discontinue software that does not have real market potential, saving
some R&D and support costs. Although with a fanatical focus on immaculate
go-live implementation dates, i2 might salvage its reputation, and thereby
acquire new customers and up-sell to existing ones that are satisfied
with results, still, i2 is not entirely in control of its execution in
this challenging economy.
chain vendors, like their ERP counterparts, also need to articulate the
value of their solutions. Most vendors have been grappling with figuring
out how to include a return on investment (ROI) calculation as a part
and parcel (and a catalyst) of the sales cycle. Some of the major supply
chain vendors (like i2 and Manugistics) are facing resistance and
protracted sales cycles for two key reasons. First, both vendors have
built their product portfolios through acquisitions and are still entangled
in delivering the components of a truly integrated suite (see Manugistics
Indulges In The Open M&A Season). Additionally, there are still significant
barriers to an easy deployment of supply chain planning (SCP), as they
are based on cumbersome proprietary algorithms and heuristics that take
a long time to master and harness to work, forcing the company to have
a full-time rocket-science' consultant on the premises to keep the application
in tune with the business processes it supports.
the CRM market is down too, there is still a lack of penetration in many
sub-markets (e.g. marketing and eService) and there is still an ample
growth potential in nearly all industries when the market picks up again.
Despite the unpleasant quarter, Siebel remains one of the best-managed
software companies in the business, still having a strong penetration
in all Tier 1 ERP vendors' client bases (except for the SAP's one) and
leadership in many verticals (e.g., service industries and insurance).
With ongoing prudent management, its large customer base, solid cash position
and strong balance sheet will still keep Siebel strong when the market
may be quite different situation for its smaller CRM brethren though,
which face relegation to their niches, demise and/or consolidation to
enhance their offerings. Siebel is also taking the bull by the horns'
by acknowledging the integration challenges its customers face, and by
addressing that issue, which has been one of the major sales deterrent
of late. This has also often been a troubling aspect of CRM implementations
in the past, as the only way IT departments can achieve a full view of
the customer is by integrating front-end, customer facing applications
(e.g., contact management) with back-office systems, such as billing applications
and financial ERP modules.
the era of Siebel's uncontested supremacy in the CRM market for the past
several years seems to be nearing the end, also owing to both Tier 1 ERP
vendors intrusion of the CRM space and to some mid-market CRM vendors
coming of age. Siebel's moves towards delivering industry templates and
the solutions for mid-market are commendable, as in the current economic
climate, Siebel's CRM-centric functionality bells-and-whistles and an
adequate Web-enabled product architecture may look ever less compelling
even to the higher-end of the market, as enterprises with heavy ERP investments
from ERP leaders-turned CRM wannabes might settle for likely less powerful
CRM offering of those, in exchange for the potential long-term benefits
of extended enterprise applications integration and subsequently lower
total cost of ownership (TCO).
fact is also that the CRM functionality offered by ERP leaders will not
necessarily be inferior in every case either. As an example, if the importance
of order management and content management in a user's business strategy
is great, one should not be terribly surprised if SAP, PeopleSoft or any
other traditional ERP vendor outscores Siebel in the enterprise applications
selection. This has long begged the question when Siebel would move beyond
fancy order capturing, contact management, and/or call center, and take
on the user's entire order management process.
has indeed traditionally shown a little support for transactional and
order fulfillment capabilities, whereas many ERP vendors can offer the
support for each stage of the customer life cycle engage, transact,
fulfill, and service afterwards. In any case, each of these is a critical
customer-facing process, and Siebel seems to have excelled only at the
first and the last. By acquiring troubled i2, Siebel could avail itself
with much-needed back office and supply chain order management capability
though, but it might not be that likely due to the unattractiveness of
i2's current above-mentioned predicament.
Recommendations for CRM
currently selecting CRM solutions should therefore evaluate how the "transact"
(order management) and "fulfill" (pick/manufacture/pack/ship) phases of
the entire (engage, transact, fulfill, service) customer's experience
will be achieved, as there is a true value in tightly coupled CRM/ERP/SCM
functionality, without a need for an underlying third-party integration
engine . At least, pure-play CRM vendors must provide rich integrations
based on sets of commonly-used, pre-defined business process components.
To that end, Siebel's idea of its Universal Application Network (see Siebel
Rallies Its Integration Alliance Troops) seems innovative and should
help the needs of the higher-end of the market, whose paramount concern
have been the enormous costs of integration and the general lack of responsiveness
by enterprise application vendors to address this issue. Siebel's embracement
of standards-based Web services as a technology enabler may appeal to
customers that are keen on preempting dependencies on proprietary Application
Programming Interfaces (APIs).
positive news is by no means limited to the large players only. J.D.
Edwards and Lawson Software continue to focus on their traditional
verticals and have further rounded out their products. Traditional mid-market
vendors such as Made2Manage, Intentia, Lilly Software,
IFS, QAD, Exact Software, Scala, and Best
Software to name only some remain solid players by staying focused
on their roots in manufacturing and/or distribution. Each company has
either completed or is in the process of enabling its systems to take
advantage of Web Services that will assist in integrating systems and
allowing the mid-market enterprises to collaborate with their trading
partners and consumers.
to increasing visibility of supply chain information, the necessity of
SCM has also increasingly become the provision of real-time information.
Therefore, the use of traditional advanced planning & scheduling (APS)
methods that are non memory-resident and latent in itself as a basis for
all decision making is becoming increasingly unsound.
future will thus see a blend of real-time supply chain event management
(SCEM) and SCP with its strengths in inventory management and capacity
planning. To that end, Adexa has been posting growth and good financial
results by providing a homegrown solution that is flexible and integrated
on a single data model and can be incrementally implemented as required.
vendors still doing well in the SCM space are those that enable companies
to manage vendor relations and fulfillment processes.. Companies such
as Prescient Systems, Escalate, SoftChain, webplan,
VCommerce, Ortems, SeeCommerce, and Teadec
in SCEM, visibility, and performance monitoring are able to connect disparate
systems to provide all the parties with near-real-time information on
current movements and trends. Also, Manhattan Associates' and RedPrairie's
(former McHugh Software) ability to expand their warehouse management
system (WMS) and supply chain execution (SCE) expertise to address customers'
need of fulfillment management has played well to their strong recent
performances. In today's depressed market, the message of quick ROI and
its direct impact on customer satisfaction resonates loudly enough to
nonetheless keep customers buying.
is indisputably difficult to select a service provider in markets that
are fragmented, immature and rapidly consolidating. The niche specialists
should not be downplayed, although it is increasingly sensible to scrutinize
their financial viability, particularly in terms of balance sheet, management
profiles and customer base. Existing customers of troubled vendors should
address their concerns directly with the management and put in place contingent
plans for ongoing support. Potential customers should proceed with caution,
buying components only in a tactical manner and with a clear quick ROI
(in less than a year payback period). In any case, stick to a series of
smaller projects targeted at streamlining a specific business process,
and keep it simple & smart -- frequent and accurate real-time exchange
of demand and supply data can reduce supply chain planning costs without
extensive automation or software analysis.
aggressive during negotiating risk allocations, price parity and general
terms and conditions. Fixed project prices (as opposed to time and material
pricing), milestone payment schedules linked to deliverables, and penalty
clause for late deliveries (as well as the profit sharing incentive for
early completions) should be a matter of course. Also, it might not hurt
to consider reviewing your current processes and systems as to find any
still undetected malfunctioning practice in accounting and/or financial
a more general note, as leading applications vendors have been reaching
parity across many CRM areas, new users should base their software purchase
decisions on many other criteria like impending integration costs, product
usability, product architecture, and TCO. Given vendors' zeal for new
license revenue, do avail yourself of vendors' assistance in identifying
return on investment (ROI) in the concrete case, in application customization
for vertical industries, and in integration to your legacy applications.
Also, insist on "scripted business scenarios demonstrations" or "conference
room pilots," or even on the opportunity to conduct extensive system tests
within your environment. Although the widespread acceptance of Web services
deployment is only in its nascence, large global enterprises should still
start learning the new protocols, standards and technologies in order
to grasp the potential business advantage.
for Microsoft followers, they should be pleased with Microsoft's partial
execution of its Web Services strategy by delivering a production-ready
.NET. Microsoft remains a good choice for Windows environments with an
abundance of PC desktop-oriented activities, and that are involved in
next-generation platform (e.g., .NET and Web Services) development/deployment.
Microsoft might not be such good a choice for complex organizations that
need solutions for complex computing problems (a high-volume backbone
ERP system that uses publish-and-subscribe message-oriented middleware
(MOM) and multi-vendor integration projects (hardware, software, services)),
solutions where security is of high concern, and projects where cross-platform
is a matter of course, and where most application developments are done
IBM is a good choice to deliver solutions for complex/changing computing
and IT infrastructure services, particularly on Unix or Intel servers,
while it may not be so good a choice for simple computing problems, and
small/midsize business (both in hardware, software, and services terms).
Despite the PwCC acquisition, IGS might not currently be the best solution
for business strategy consulting. While critical to IGS's future, it will
take some doing for it to be built up as a core competency. PwCC's existing
customers should keep a close eye on the teams working on their projects
to make sure there is no an exodus of talented people who are replaced
with less-knowledgeable people. Prospective customers of either company
in the immediate future should inquire which company will provide the
resources and what affect the acquisition will have on their engagement.
Also, watch out for engagements involving PwC partners who compete with
IBM, such as EDS and HP.
general, the market should watch out for the honesty and the longevity
of the IBM/Microsoft relationship particularly in the Web Services governing
organization, as well as for theirs future acquisitions. Also, beware
of any vendor that is inclined to create much dependence on its technology,
as it leads to unjustifiable price increases, and a declining openness
in the future.